As Korean Heirs Feud, an Empire Is Withering; Change and Frail Finances Doom the Old Hyundai

By DON KIRK

Published: April 26, 2001

SEOUL, South Korea, April 25—
Each son got at least one company; if he impressed his father sufficiently, he might gain two, three or even more.

It was all part of the plan of Chung Ju Yung, the oldest of five brothers, father of eight sons, head of more than 80 companies, employer of 170,000, multibillionaire, master builder and ruler of an industrial empire spanning the globe.

''My father decides,'' one of the sons, Chung Mong Joon, once remarked when asked how one son gained this company, another son that one. ''Everything is done by my father,'' said another, Chung Mong Yoon.

For the last decade of his life, the abiding passion of Chung Ju Yung -- founder and, until his death on March 21 at 85, honorary chairman of Hyundai, the archetypal Korean conglomerate -- was to immortalize himself through his heirs.

Yet in his final year, frail and stumbling, his voice sometimes slurred, he watched the group slowly disintegrate amid the rivalry of his sons and demands by the South Korean government for far-reaching changes.

Not that his legacy has vanished. Even as some of his companies teetered near bankruptcy, three groups with Hyundai in their names ranked among the top 30 South Korean conglomerates a week after he died.

The core group, under Chung Mong Hun, maintained a shaky hold on second place, after Samsung. The auto companies, under Mong Koo, the oldest surviving son, ranked fifth, while the Hyundai Department Store Company, under Mong Keun, was 26th.

Put them all together, united by blood ties and old crossholdings, and Hyundai, meaning ''modern,'' would still be the leading group in all of Asia.

But fraternal tension has shattered any thought of unity, a tension that has intensified since the patriarch's death. The sons have gone their separate ways -- each in charge of a company or group of companies. While acclimating themselves to life without father, each tries, with widely varying degrees of success, to live up to the legacy.

A proud Mong Koo, 63, holds up the recently revived motor vehicle companies -- not the core group -- as exemplifying his father's spirit.

''Hyundai-Kia auto group will succeed my late father's Hyundai family as the legitimate heir,'' he told his subordinates, giving equal emphasis to Kia Motors, which Hyundai took over in 1998.

Mong Koo's remarks came days after the entire family, down to grandchildren, nieces and nephews, met for the first time in years for the patriarch's funeral.

The family's story is one of triumph, tragedy, feuding and scandal -- all rooted in the drive of the founder, a peasant's son from what is now North Korea, to earn a fortune and leave it to his sons.

To a point, the story is typical, for all Korean conglomerates are family-dominated, all marked by conflict and scandal. But it would be difficult to top the stories surrounding this family.

Hyundai executives, at group headquarters beside the Secret Garden, playground of royalty a century ago, sometimes speak of the struggle for power as if it were over, a bad dream fading before a brighter future.

But when asked about the time Mong Koo refused to receive Mong Hun, or the refusal of other brothers to make loans to companies that Mong Hun supposedly controlled, one executive, insisting on anonymity, responded with a plea not to draw him into trouble. ''There were some problems,'' he said, ''but they're all sorted out now, particularly after the final separation of Hyundai Motor from the rest of the group.''

Down the hall, Mong Hun, 52, still suffers the humiliation of losing Hyundai Engineering and Construction, the first company founded by his father, in 1947.

''It cannot be in the group when the banks hold the equity,'' the executive said, referring to the plan for creditors to take a controlling stake by swapping some of Hyundai Construction's $5 billion debt for equity at the next shareholders' meeting in May.

Then there is Hyundai Electronics, which Mong Hun ran in a losing competition with Samsung Electronics from the time his father founded it 28 years earlier. In two months, it will be separated from the group, having sought to reinvent itself by abandoning the Hyundai name to become Hynix Semiconductor -- ''a modern, youthful leading player in the global semiconductor market,'' a spokesman said.

The company's chairman, Park Chong Sup, long a faithful Hyundai hand, now disavows any association with Hyundai while lapsing into silence when asked about Mr. Hun, for years his immediate superior.

And Hyundai Heavy Industries, founded by Chung Ju Yung in 1973 and still the world's largest shipbuilder, also plans to join the flight to the exits by year's end.

For Mong Hun, the loss of Hyundai Heavy Industries carries another kind of humiliation. Unlike Hynix or Hyundai Construction, it will remain in the family under a younger brother, Chung Mong Joon, 49.

Hyundai Heavy Industries' biggest problem is that it has been rich enough in recent years to try to rescue other Hyundai companies, notably Hynix, to which it extended more than $1 billion in payment guarantees. But such generosity cannot go on as the government investigates Hyundai Heavy Industries' links to the rest of the group and creditors complain about transparency.